Straight Talk from Al Jacobs

INVESTORS WANTED: SIMPLETONS ONLY NEED APPLY

The advertisement is certainly impressive; the full page spread literally beckons the viewer to act fast before the opportunity of the century gets away. The offering is the “New California State Silver 100’s” for which “the phone lines are ringing off the hook.” The actual items being marketed are 50 one-ounce silver coins, described as “proof finish,” each commemorating a different state of the union. The price of each coin is $99, which is described as “the state minimum set by the private Federated Mint” – which, understandably, is the firm marketing the coins.

The actual product being promoted is not a single coin at the quoted price, but rather the full 50-coin set. The bonus offered is that select California residents can get 20 of these coins free.” This they describe as “a real steal because it’s saving each California resident over two thousand dollars.” It’s true, of course, that the price of 20 coins at $99 each equals $1,980, so with sales tax included the savings can be said to be “over two thousand dollars.” I’m sure this should induce some persons to do exactly as the ad recommends: “Don’t wait to call. Pick up the phone right now and get as many of the new California State Silver 100’s as you can before they’re all gone.”

Let’s now back up a bit and take a look at this investment opportunity in a more realistic manner. What’s actually being sold and at what price? The collection of coins, which are individually wrapped and packaged in a container the size of large cigar box, contains a total of 50 ounces of silver. Only the silver has value; the packaging is merely a marketing contrivance designed to make the offering seem impressive. Thus, the fundamental question is: What is the market value of 50 ounces of silver? The advertisement appeared 12/21/17; on that date the spot price of an ounce of silver was $16.23. It takes little mathematical skill to determine the 30 coins for which a purchaser pays $99 each costs $2,970. The 50 ounces of silver acquired at $16.23 per ounce represents an actual value of $811.50. This amounts to a markup $2,158.50. It takes a vivid imagination to construe this as an attractive investment

A final comment: There’s nothing unusual about this advertisement. I’ve seen these sorts of offerings over the years, in various forms, over and over. They’re designed to attract the gullible among us, who are unable to fixate on reality. Whether there should be laws to protect the many naïve members of society can be debated.

 

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Al Jacobs, a professional investor for nearly a half-

century, issues a monthly newsletter in which he

shares his financial knowledge and experience.

You may view it on http://www.roadwaytoprosperity.com